Setting up a limited company is very easy.
There are many web sites that will do this for you – some offering the service for free and others with varying levels of prices.
How do you know which one to choose?
A difficult choice although do be prepared to be bombarded with emails trying to sell you services from the free or cheaper ones.
A straight forward service can be found at a reasonable price, £18, at Companies House (the place where new companies are registered):
However be aware of – there are some pitfalls to be avoided then you set up a limited company.
Five things to get right …
The key is to keep it simple.
There is usually no need to set up some complicated share structure. In fact you can actually set up a company with one share at £1 each and be the sole shareholder.
Do remember that you for each share that is allocated to you as a shareholder you must pay the limited company (separate legal entity) for the value of the share.
So please do not do what we saw in one example – 8 shares of £1,000 meaning that the sole shareholder owed £8,000 to the limited company.
You do need to appoint at least one director for the limited company. The director can also be a shareholder and it is perfectly acceptable to have just one director who can also be the sole shareholder.
There is no need to appoint a company secretary. This requirement was removed several years ago.
In fact, the company secretarial duties for a ‘one person’ limited company are straight forward. So in all likelihood there is no need to pay for company secretarial services that are offered by many formation houses.
Business Bank Account
You will need a separate business bank account for the company and should not use your own personal bank account. The company is a legal entity and must be treated as such with all records and bank accounts being kept entirely separate from your own personal accounts.
Register with HMRC
Getting the company registered at Companies House is easy and usually takes less than 24 hours.
However, this is just one part of the story. You will need to register the company with HMRC – the formation process at Companies House does not do this automatically.
The company has to be registered at HMRC for corporation tax and possibly VAT and PAYE.
Whilst the formation may be cheap or free, you may have to pay more for the formation house to provide these set up services or you may have to do them yourself.